2018 (2) TMI 1243 - AT - Central Excise

CENVAT credit - It appeared to the Department that since the capital goods were not installed in the premises of the assessee but in the premises of HLIPL which had separate Central Excise Registration, availment of credit thereof by the assessee was not in order - Held that - for availing credit of capital goods the conditionalities of Rule 2 (a) of CCR 2004, will require to be satisfied interalia that goods should be used in the factory of manufacture of final products - From the facts on record, it appears that the assessee has availed credit under cover of invoice dated 01.11.2008, which was around five months prior to the date of the said merger. However, at the same time if the assessee had not taken the credit on or around 01.11.2008, but only on or after 01.04.2009, the availment of credit would not have excited any controversy. In our opinion, therefore assessee s right to avail the credit on the said capital goods is very much available w.e.f. 01.04.2009 and the availment of credit prior to that date does not extinguish such eligibility - the availment of Cenvat credit by the assessee cannot be disturbed, however, the assessee will require to discharge interest liability at applicable rates, for the period 01.11.2008 to 01.04.2009. CENVAT credit - the importation of these goods have been made under project imports for which specific Chapter Heading 98.01 exists in the Customs Tariff - Held that - Evidently, there is no corresponding entry in the Central Excise Tariff. Hence, for purposes of charging additional duty of customs (CVD) the classification of those goods under CETH will be relevant at the time of import. Thus for a project import under CTH 98.01, the capital goods involved in the import will be necessarily classified under different CETH headings for CVD purposes. Keeping in mind this scenario, legislature has specifically inserted an Explanation to Rule 3 (1) of the Rules, which clarifies that a manufacturer or producer of final products shall be allowed Cenvat credit of additional duty of all goods falling under CTH 98.01 - The takeaway from this Explanation is that once the goods are imported under CTH 98.01, irrespective of where the goods would be classifiable under CETH, they will become eligible for availment of the CVD portion as capital goods credit - credit rightly allowed. Appeal allowed in part.

Summary

Issues:
1. Availment of Cenvat credit on capital goods not installed in the factory premises.
2. Availment of Cenvat credit on goods imported under project imports with disputed classification.
3. Imposition of penalty on the Managing Director for alleged mis-declaration.

Analysis:

Issue 1:
The first issue revolves around the assessee availing Cenvat credit on capital goods not installed in their factory premises. The Department contended that since the goods were situated in an adjacent unit, credit should not have been claimed. However, the Tribunal considered the merger of the assessee with the adjacent unit and ruled that the credit was valid from the merger date, i.e., 01.04.2009. The Tribunal held that the credit availed prior to the merger did not extinguish eligibility, but interest liability would apply for the period before the merger.

Issue 2:
The second issue concerns the availment of Cenvat credit on goods imported under project imports with disputed classification. The Department argued that the goods fell under a different classification, making them ineligible for credit. However, the Tribunal analyzed the relevant Customs and Central Excise Tariff classifications, emphasizing the Explanation to Rule 3 (1) of the Cenvat Credit Rules. The Tribunal concluded that the goods were eligible for credit under project imports, regardless of the disputed classification, citing precedents to support their decision.

Issue 3:
Regarding the penalty imposed on the Managing Director for alleged mis-declaration, the Tribunal examined the circumstances and evidence presented. The Department asserted that the Managing Director knowingly mis-declared information. However, the Tribunal found no substantial evidence supporting the claim and ruled in favor of the Managing Director. The Tribunal emphasized the lack of proof regarding the alleged mis-declaration and overturned the penalty imposed on the Managing Director.

In conclusion, the Tribunal set aside the impugned order demanding recovery of disputed amounts, totaling &8377; 1,59,46,441. Both appeals were allowed, providing consequential benefits as per the law. The detailed analysis for each issue provided clarity on the eligibility of Cenvat credit and the imposition of penalties, leading to a favorable outcome for the appellants.